Opec oil supply cuts are achieving their goal of balancing the market and steadying prices, ministers and officials said on Tuesday, shrugging off the International Energy Agency's call for more Opec oil. The Organisation of the Petroleum Exporting Countries will meet here on Thursday to set output.
Ministers have signalled no change after agreeing to curb supplies by a total 1.7 million barrels per day, or six percent, at their last two meetings. Instead the emphasis is likely to be on ensuring the agreed cuts are put in place. Industry analysts estimate that Opec, which pumps over a third of the world's oil, has made good roughly one million bpd of the reductions.
"It is unlikely they will change production," Opec Secretary General Abdullah al-Badri told Reuters. That view was echoed on Tuesday by Iran, Libya and Kuwait. With oil back up near $60, demand growth accelerating and consumer nations' fuel stocks falling there appears to be agreement within Opec that it has already done enough.
The International Energy Agency and some analysts believe Opec may have gone too far. According to the IEA, adviser to 26 industrialised countries, OECD countries could be headed for the largest first quarter drop in oil stocks for over 10 years.
"Stock trends and prices are signalling that higher Opec exports will be needed in the months ahead," the IEA said in its monthly Oil Market Report, released on Tuesday. Analysts at Barclays Capital agreed: "The risk is that Opec has now taken too much oil off the market."
Even the most conservative projection, Opec's own, puts demand for Opec oil at above 30 million bpd. That number includes Iraq and new member Angola, both of which are exempt from output restrictions for the time being.
A majority in Opec, including top oil exporter Saudi Arabia, have said - barring a price collapse - they prefer to stick with an output target of 25.8 million bpd for the other 10. "We should wait before making any decision about changing production," the head of Libya's delegation Shokri Ghanem told Reuters. "The market is in a balanced situation."
Opec's head of research, Hasan Qabazard, told Kuwait's state news agency KUNA the organisation had created a market balance "that is favourable to all oil producers". Opec argues oil prices must be sufficiently high to encourage investment, without choking economic growth in consumer nations. The organisation scrupulously avoids setting a price target, but some individual ministers have said they believe $60 is a reasonable level for US crude oil. "I think $60 is a good deal for everybody - for producers and consumers," Qatari Oil Minister Abdullah al-Attiyah said recently.
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